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tv   Nightly Business Report  PBS  May 14, 2012 6:30pm-7:00pm PDT

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>> this is n.b.r. >> susie: good evening, i'm susie gharib. tom is on assignment. greece fails again to come up with a new government raising new doubts about its membership in the euro-zone. yahoo's c.e.o. steps down after misstating his academic record. can the struggling web giant survive? and we head to cattle country to kick-off our week-long look at the agriculture economy. we visit omaha steaks. that and more tonight on "n.b.r." we begin with greece. investors around the world are getting more and more worried about whether greece will remain in the eurozone. and if it does exit, what does that mean for the global economy. those concerns intensified today
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as political leaders met and failed to form a new government following last week's elections. darren gersh reports. >> reporter: the message from greece lately has been no. no to leaving the euro-zone. no to economic austerity. and today no to forming a new government. >> people assume things are under control and we still play games and strategize, but i think it becomes more and more clear that things are not that much under control. >> reporter: greece's political leaders will try again tomorrow to bridge their differences, perhaps bringing technocrats into a new government. but european leaders, annoyed by the political gamesmanship in athens have been signaling their displeasure, hinting greece may find its way out of the euro and even the european union. >> it's a very dangerous game bordering with irresponsibility. but there is also a lot of >> reporter: and even if a coalition government is formed, it may not be very effective. >> if it continues implementing the austerity measures, we might very well see very quickly this
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coalition breaking down. >> reporter: for now polls show most greeks believe leaving the euro would bring only chaos. >> it will result in the complete collapse of the greek financial sectors. it will result in the complete collapse of the private sector whose debt are denominated in euros. >> reporter: world financial markets are also hunkering down for another round of greek drama that may result in yet another round of elections next month. darren gersh, "n.b.r.", washington. >> i'm diane eastabrook omaha steaks is gearing up its production line for its second biggest holiday: father's day. "nightly business report" is brought to you by:
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captioning sponsored by wpbt >> susie: a rough day on wall street. u.s. markets followed european stocks lower as investors worried about that situation in greece. the dow tumbled 125-points. the nasdaq lost 31 and the s&p down 15 points. commodities also sold off: gold fell $23 to $1,561 an ounce, wiping out all of its gains for 2012. also hitting a new low for the year: oil. it closed at $94.78 a barrel in new york trading down over a dollar. over at yahoo, the revolving door turns again. this time c.e.o. scott thompson is out, after it was revealed he padded his resume with a bogus college degree. he's is being replaced by ross levinshon, the firm's head of global media. so what does this change at the top mean for one of the nation's biggest media companies? erika miller reports from new
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york. >> reporter: this is ross levinsohn, the seasoned ad exec who is in charge at yahoo!, at least for now. but let's be clear, even though scott thompson is out, the firm still faces big credibility hurdles. >> when you look at character and reputation, they are as important today as they are capital issues. and we can't have a company of any size, regardless of the size as yahoo that it plays in our economy and our culture when the ceo is falsifying information. >> reporter: the media giant's share price is now about half what it was in may 2008, when yahoo! turned down a bid from microsoft. revenues have fallen, as the company struggles to keep up with google and facebook in attracting online advertising. and now that thompson is out, his turnaround plan is called into question. >> there's a reorganization plan in place. what happens to that reorganization plan? what are the marching orders going forward at the same time? >> reporter: the company was able to reach a truce with dissident shareholder daniel loeb, adding three of his
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proposed nominees to the board. but that creates its own leadership challenges. >> there will always be some questions about-- when we're looking at strategy going forward-- is this really to appease the hedge fund investors and the money people. as opposed to what is the right strategy going forward. >> reporter: the new c.e.o. will be yahoo's fifth in five years, so the board is likely to vet the candidates closely. but the company's tunaround efforts probably won't gain much traction, until a permanent leader is in place. erika miller, "n.b.r.", new york. >> susie: more turmoil at the top for best buy, the struggling electronics retailer says founder richard schulze will step down as chairman next month. the reason-- he failed to tell the board about a former c.e.o.'s romantic relationship with a female employee.
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>> susie: california's budget woes just got bigger, a lot bigger. governor jerry brown announced today the golden state's expected budget shortfall has ballooned to nearly $16 billion. that's almost double the budget gap at the beginning of the year. the governor is proposing $8 billion in spending cuts, including across the board pay cuts for state workers. but he says cost reductions alone won't balance the budget. he also wants a temporary tax on high income residents. fixing california is key for the u.s. economic recovery: the state represents almost 13% of the u.s. gross domestic product.
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while agriculture accounts for a small percentage of our g.d.p., it has a big impact on the global economy. all this week we'lbe looking at how everyone from food processors to equipment manufacturers rely on this robust sector. >> roughly two million farms in the u.s. produce everything from corn to cotton. and those products are consumed everywhere from indiana to india. demand for corn, soybeans, and meat especially from developing countries like china are driving up grain prices and farmland values. the u.s. department of agriculture forecasts net farm incomes will be close to $92 billion this year, down slightly from last year because of rising input costs. farm real estate values continue to appreciate. they're double what they were a year ago. thanks to those high incomes and healthy balance sheets, farmers are spending more in their rural communities, investing in everything from combines to
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clothing. >> susie: we kick off our series on the agriculture economy in omaha. summer's just around the corner and that means firing up the grill for steaks and burgers. but if beef is on the menu, you might have to budget more for your cookout. prices are going through the roof. diane eastabrook introduces us to a company synonymous with steak. >> reporter: in the heart of cattle country, omaha steaks is ramping up for its second biggest holiday: father's day. over the next month 150 employees will ship about 300,000 orders of steaks, chops, and burgers for backyard grills from one coast to the other. and this is nothing compared to christmas. >> in december, we will ramp our business up to just this facility alone just shy of 800 people. >> reporter: omaha steaks is the nation's largest marketer of steaks and frozen food. it sells directly to consumers and through its 80 retail stores. todd simon runs the 95-year-old
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family firm with his cousin. he says sales have exploded over the last few decades. >> in 1984, i think we did $12 million the entire year and now we're approaching $500 million in revenue. now you wouldn't think a company with steak in its name would be recession proof or recession resistant, but omaha steaks rode out the recession because of the value it says it offers to its three million customers. simon says in tough times a gift box of steaks is an affordable luxury. >> we're not like a new car or a new house. you know for $100 or $50 you can buy omaha steaks and enjoy them with your family. >> reporter: but that affordable luxury is getting less affordable. in recent years farmers slaughtered cattle early because of rising grain prices. that whittled the u.s. herd down to its smallest size in 60 years. so beef prices are now skyrocketing. omaha steaks says it's been aggressively controlling costs, so it can hold the line on prices.
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>> that's not to say we haven't had a little bit of pressure to our margins in the process, but our goal is to deliver the very best value to our customer family, so we try to smooth that out, we try to be smart about how we buy the commodities so we can always offer consistent value to our customers. >> reporter: part of that value includes offering more items like desserts. simon thinks this is shaping up to be another successful year for omaha steaks much to the chagrin of these fellows. diane eastabrook, "n.b.r.", omaha. >> susie: tomorrow, we meet the woman behind newman's own organics. nell newman tells us how she convinced her famous father that there was green to be made in going organic.
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>> susie: two familiar american companies filing for bankruptcy today. first, lightsquared, the satellite communications company. it spent over $4 billion trying to launch a wireless network across the u.s., before plans were blocked by regulators earlier this year. but lightsquared says it still plans to work through the issues with regulators while in bankruptcy. also filing for bankruptcy today: rescap. that's ally financial's mortgage unit and once one of the nation's top subprime lenders. by filing for bankruptcy, rescap will be able to skip millions in bond payments and that could help parent company ally financial repay more than half of the $12 billion in bailout money it still owes uncle sam. ally also said today it plans to sell some of its overseas operations to pay that debt.
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in the past two weeks, all the fretting about europe has wiped out half of the dow's gains for the year. let's take a look in tonight's market focus. today's selling was broadbased with all three major indexes getting hit. the s&p 500 slipped from the opening bell and fell below a key technical support of 1,340. it rebounded slightly at midday, but dropped back below 1,340 by the close. if it stays below that, there's concern we'll see a steeper pullback. despite all the selling, volume here at the big board is still very light around 800 million shares. nasdaq volume fell below one three quarter billion. three-quarters of the stocks on both exchanges were down. all ten of the s&p stock indexes were in the red. but financials topped the heap of losers dropping about 2% as fallout from j.p. morgan's trading losses dragged down the sector.
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j.p. morgan's stock lost 3.2% to close at $35.79 it has now dropped nearly 13% since the story broke on thursday. citi, wells fargo, bank of america and goldmans sachs also lost ground in sympathy. we're going to talk more about bank stocks in a few minutes. after the bell, groupon reported it's first profit since going public in october. the daily deal company earned two pennies a share, double what analysts expected. revenue was also better than expected by 28 million. groupon's shares jumped nearly 20% today ahead of the results. but, are still way down, since the i.p.o. launch. in after hours trading, the shares were up $2. meanwhile, shares of ancestry.com fell about 14% after nbc decided not to renew the tv show "who do you think you are." ancestry sponsors the program, which uses its databases to trace the family history of celebrities. the show has run in the u.s. for
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three seasons and is considered a major driver of new subscribers to the website. a new twist in the avon-coty merger drama. avon products might finally be warming up to coty and its sweetened takeover bid? avon said sunday it would respond to the latest offer within a week. the cosmetics company has rejected coty's previous offers. avon stock gained nearly 4% today on hopes for a deal. in other dealmaking news, bmc software shares rose nearly 9% as the company tried to scare off a hedge fund group. elliott associates holds a stake in b.m.c. and is calling for the sale of the software firm. meanwhile, chesapeake energy gained about 5% after the ceo told investors today it would complete asset sales to raise much needed cash. he also said he wouldn't be surprised if carl icahn had bought a big stake in company as the wall street journal reported friday. in the bond market, investors gobbled up u.s. government debt
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as the flight to quality trade continued. bond prices rallied, pushing the yield on the 10-year treasury down to 1.77%. that's the lowest level since october. the interest rate on the ten- year is now within striking distance of the all-time low, set in september. in our market flash of exchange traded funds financial and emerging markets sectors continue to lose ground. each fell more than 2% on recession worries in europe and a potential slowing of growth in china. and that's tonight's market focus.
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>> susie: tonight's word on the street: banking. despite today's sell off in bank stocks, our next guest still sees some good buys. david peltier is portfolio manager at thestreet.com. he is dave we're you're saying to the all big stocks are like jpmorgan. tell us a little bit more. >> i think it's important when you look at the first-quarter earnings season, the earnings in general were better than expected. what drove that, it was really the financial sector. not only were those easternings better than expected, but really you saw better growth in the financial sector than you did really in any other sector out there. >> susie: it looks like investors are have really lost faith in these stocks. now you have identified two that you like. let's take a look at the first one. huntington hvan, ticker symbol on the nasdaq, the stock was down today, why do you like that? >> well, first of all, huntington is a regional. i think the regionals like huntington and the secretary name we'll talk about are
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taking market share from some of these bigger banks like jpmorgan. first of all huntington operates in ohio and that region is growing faster than the rest of the economy. also this company is very well run. it's a garden variety bank. they're not in exotic areas of the market and really they're just going to generate consistent growth year-over-year. >> susie: but you know, even though all that sounds good, we look at that stock over that two year period on that chart we showed a moment ago. pretty choppy. and the price is pretty much at the same level it was two years ago. so that's not much, very encouraging. >> well, i think what happened with huntington is that it is a low dollar stock. it is a 6, 7 dollar stock. when you look at some of the other low dollar banks like a bank of america, the most actively traded stock in the entire market, sometimes huntington falls under the radar. huntington came back with its dividend last summer, 2.5% dividend yield, management buying back stock both for the company and on the open market. and i don't think this stock which currently trades at a
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discount to its peers will continue to do so for much longer. >> susie: okay. let's move along because we want to get a couple more. u.s. bank kopp is another one you like and this is one warren buffett loves. what is the attraction? >> again, this is a regional, a super-regional. this is much larger than hadn'tington but much smaller than say a jpmorgan. us bancorp is a company that delivers quarter in quarter out. the mortgage business is strong right now. net interest margin is improving. this is a company that takes and deposits and makes loans. it's very old-fashioned banking but usb is one of the best ones at it. >> susie: okay. i've got to ask you about jpmorgan. so the stock is down 13% just since last thursday. at $35, is this a buy? >> well, it's funny, when i went back and looked at the chart, i remember back in 2002, 2003, jpmorgan was trading around $15 a share. one of the reasons why you bought the stock then was the dividend yield. jpmorgan was yielding almost 6%. and you thought the dividend was safe. i look at the dividend now t is only 3.3%.
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just because the stock has come down a lot, doesn't mean it's cheap. doesn't mean it's a good time to buy it i want to see catalysts. >> susie: real quickly if a word or two, you say wells fargo is best in breed among the bank stocks, why do you like it in just a few words. >> wells fargo a great operator. very simple bank. doesn't have again these exotic businesses. it is going to generate consistent growth quarter-over-quarter. >> susie: all right, do you have any disclosures to make on any of these stocks? >> no, i am restricted from owning any of these. >> susie: all right, thanks a lot, dave. great to see you, you can read david's article at the thestreet.com and there a link to it on our web site, thestreet.com, david peltier. >> tom: i'm tom hudson. tomorrow on n.b.r. we will be here in las vegas at the moneyshow. with stock indices at three month lows, commodities like gold under pressure and europe continuing to be a drag on confidence, we will talk with
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jim jubak about how investors can handle the heat. that's tomorrow from the moneyshow in las vegas. themselves could do more to help restore faith in wall street, here's simon constable, wol up nist at the "the wall street journal". >> reporter: by now >> by now i'm sure you've heard about j.p. morgan's $2 billion trading loss. and the screams of outrage and the calls for more banking regulation. maybe regulation is part of the problem but not all of it. what you may not know is that at least part of the problem comes from what economists call agency cost. the cost of having someone run the business who doesn't own it. the owners j.p. morgan shareholders have goals that are vastly different from those of the employees, in this case the traders. employees want big bonuses, shareholders want steady profits. the fact is the people at j.p. morgan who made the bad bets and lost all that money were gambling with someone else's
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money and were doing so in a way that was not in the best interest of the shareholders. if the trades do well, they get huge bonuses. if the trades go bad, the shareholders suffer and maybe, just maybe the traders lose their jobs. if the traders were the owners, or were heavily supervised by the owners then in all likelihood, crazy bets wont get made. in fact decades ago that's how it was on wall street. brokerage houses were partnerships. if you were trading, you were doing so with your boss's money. you bet he or she was keeping a close eye on the situation. so blame lack of regulation all you want, but also have a thought for getting wall street firms off wall street and back into partnerships. i'm simon constable. >> already gm's top executive in the region says the strategy will focus onstream lining production costs around the top selling car, we're talking here
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about the astra compact. gm also plans to expand its line-up of opal and vox model which include come part car, commercial vehicles and suvs. gm has suffered more than a decade of losses in europe. well, its another record weekend for disney and "the avengers", the superhero movie made another $100 million at the box office. no other film has ever made this much money in its second week end and it pushes "the avengers" worldwide sales total past the $1 billion mark. last week disney said a sequel already in the works. and finally tonight, mark zuckerberg today is the facebook c.e.o.'s 28th birthday and sets in motion what could be a really big week for him. facebook stock sales to the public is about 80 hours away. the initial public offering is expected to price thursday night and begin trading this friday. and we've learned zuckerberg will ring the nasdaq opening bell on friday. but he'll do it remotely
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from facebook's headquarters in menlo park, california is so happy birthday mark. and with bills of dollars on the line, tonight's commentator doesn't think going public was facebook's goal. here's harry lynn, executive in residence at idea lab. >> i was talking recently to a former employee of mine about a new business that we're hatching at the technology incubator at which i work. after she understood the business idea, she asked me if my ultimate goal was to grow quickly and sell the company to make money on my stock options. her question surprised me. my honest answer was no, our goal was to build an amazing company. if we happen to make a lot of money later, that would be a lucky byproduct. and so i think the same with facebook, whose ipo will break records and generate lots of money for some people. i think that if facebook's founder c.e.o. mark zuckerberg could wave a magic wand and not go public, he would. the wealth created by facebook's ipo is not why he started the company.
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he is not looking forward to quarterly conference calls with wall street analysts or seeing his company's equity become trader's bread and butter. he enjoys thinking about code. but now will have to think about flippers and stags. of course facebook has to go public because the federal regulations about its number of investors. that and its venture capital backers want an exit. it's the reason they got into the company. but for zuckerberg his billion dollar ipo is just a by does product of having built an amazing company. congratulations, mark. i'm harry lynn. >> susie: and as we've been reporting, jpmorgan having another day of drama with all of the losses in that trading cries-- countries crisis, and joining us briefly sheila bair. i know we have had some technical problemsness couldn't talk to you full out. but just want to ask you. this whole regulation debate is now back in full focus because of the jpmorgan mess. is this a matter of
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mismanagement at one bank or is it a question of lack of regulatory enforcement? what do you think? >> well, i think it underscores the need for good regulation. i think you know, you always have mistakes. you always have things fall through the cracks. that's why regulators and the f.d.i.c. and i in particular have put a very high premium on getting capital levels up at banks. because they have big strong capital cushons. they can absorb these unexpected losses when they occur. and fortunately we did require our banks to do a lot of recapitalization in 2009. we need do more. the capital markets are still undecide-- if something like this happened in europe where banks recently capitalized you could have more severe ramification. so i do think it underscores the need for stronger cap 258 regulation. i think it also raises serious questions about whether these very, very large institutions are simply too big to manage. and-- . >> susie: i hate to jump in and cut you off.
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we would like you to come back because this can congressional hearings on this, we really would like to hear more from you. thank you so much, sheila bair, the former head of the f.d.i.c.. and that's it for us, nightly business report for this monday, may 14th. have a great evening, everyone. and we'll see you on-line at nbr.com and right back here tomorrow night. "nightly business report" is brought to you by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org
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